Methanex ditches plans for $800m WA plant

Methanex has ditched Australia as a site for a new $800 million methanol plant and will invest its cash elsewhere.

The announcement from the Canadian company is a blow to the West Australian Government, which wanted Methanex Australia to build the 1.3 million tonne a year plant on the state's Burrup peninsula.

It also disappointed the North-West Shelf Gas joint venture partners who had negotiated a 16-year sale and purchase agreement with Methanex should the project go ahead.

But Methanex chief executive Pierre Choquette said costs were too high for the company, which would abandon its Australian ambitions and take a one-off $US40 million ($A59 million) charge over the plant proposal.

Methanex intends to maintain its presence in the expanding Asian market and will begin looking at alternative sites.

The decision comes just two months after Methanex president Bruce Aitken warned the Power and Gas Conference in Sydney that Methanex would walk away from Australia should Federal Government support not be forthcoming.

Methanex was offered $110 million to locate in Darwin and then $85 million when the company decided to move its then two million tonnes per annum methanol project to the Burrup peninsula.

The Federal Government withdrew a proposed incentive package after Methanex reconfigured the project as a 1.4 million tonnes a year plant.

WA State Development Minister Clive Brown said the withdrawal of Government support had cost Australia a potential $2 billion in royalties.

"This project would have also generated approximately $2 billion in royalties and taxation revenues, the bulk of which would have gone to the Commonwealth," he said.